What the class action against Coles and Woolworths means for ‘The Big Two’

The ACCC’s lawsuit against Coles and Woolworths for allegedly misleading consumers about the price of essential products has now been spun into a class action lawsuit by the Gerard Malouf and Partners law firm.For Jim Ritchie, founder and strategy partner at branding agency US+US, the price drop class action and ACCC legal action against the Australian supermarket points to something much larger.“As a country, our collective inaction around the often questionable behaviours of big business suggests a fair amount of complacency – until someone crosses the line,” Ritchie told Inside Retail. “There’s no doubt in my mind that while these ‘price-fictions’ were designed to increase profits rather than explicitly harm people, they [the supermarkets] have undeniably leveraged the economic backdrop for their own benefit,” he added.It’s hard to separate the cost-of-living crisis from the impending lawsuits against ‘The Big two’ as Australian households attempt to manage their household budgets amidst inflation.An egalitarian spiritWhile Coles and Woolworths aren’t the only retailers guilty of inflating prices and then offering an attractive ‘discount’, the practice goes against cultural norms in Australia. “Fairness is a deeply ingrained value in the Australian psyche – yet oddly, it doesn’t apply to the monopolies and duopolies that dominate our economic landscape,” stated Ritchie.“There’s always been an uneasy tension – or pseudo-truce – between the public, government, and big businesses like Coles and Woolworths,” he added.“The unspoken pact is clear: Give consumers what they want at a fair price, and we’ll tolerate the massive profits you rake in.”But with this unspoken pact breached, consumers and the ACCC are now looking for accountability and compensation.The consumer watchdogThe ACCC is seeking to enforce consumer law while the class action lawsuit is looking to compensate wronged consumers.“Together, these cases highlight the scale and significance of the allegations. Overcharging for basic goods is one thing, but creating a fake reality where you position yourself as the hero while fuelling the problem is deplorable,” Ritchie elaborated. “Unchecked neoliberalism is something the ACCC seems determined to address. Deploying both actions sends a clear message to all: ‘Dishonesty and deception will not be tolerated, mate’,” he added.Coles and Woolworths intend to defend themselves against the accusations of misleading promotions and illusory sales.But if the ACCC and the class action succeed, Coles and Woolworths will have to revise their value proposition and promotional tactics.“Coles would likely rearticulate value as being more than just about price, whereas Woolworths would probably double down on quality and freshness – which is somewhat ironic given they were price-gouging cookies,” Ritchie forecasted.Looking for value As Australians continue to demand better value for their dollar, Coles and Woolworths are potentially going to suffer short-term and long-term consequences.“If you ask consumers, they’ll likely say they’re ‘pissed off with both of them,’ but then continue shopping as usual – that’s the dark power of a duopoly,” Ritchie said. “In the short term, rising prices across the board are most likely to drive a change in a customer’s supermarket choice.“In the longer term, I believe the damage to brand equity and trust will hit Coles harder.” Despite Coles and Woolworths often being grouped together in conversations around price gouging, the two supermarkets have built two unique brand identities in the eyes of consumers.“The Coles brand is built on value and price – ‘Great Value. Hands Down,’ ‘Down, Down, Prices Are Down,’ and, most pointedly, ‘Value the Australian Way’,” outlined Ritchie. “In contrast, Woolworths has always leaned into freshness and quality. The dissonance between claiming to offer value and being forced to admit otherwise is far more damaging than admitting pricing inconsistencies while positioning on quality,” he continued.While the government, suppliers and customers await the outcome of these legal proceedings it’s getting harder to imagine how Coles and Woolworths regain their status as two of Australia’s most trusted brands.“If the ACCC wins these cases, it’s highly likely they will push for stronger regulations around promotional practices and pricing transparency,” Ritchie concluded.“In that eventuality, supermarkets will need to regain consumer trust and fend off a morally superior Aldi.”